Author Archives: RussCoff

Starbucks’ Dual Advantage

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BusinessWeek offers a nice analysis of Starbucks’ decision to lower prices on its premium coffee. Rita McGrath describes the “hourglass economy” as thick markets for low cost and highly differentiated products. Accordingly, Starbucks is keeping prices high for premium drinks in its stores but dropping the price of coffee by 10% to draw in more price conscious consumers. This strategy leverages Starbucks’ lean supply chain operations that give it a very low cost structure despite offering premium products. Ultimately, this puts higher cost rivals at a disadvantage because Starbucks can offer a better value proposition.

Contributed by Russ Coff

Chinese Dilemma: 170 Auto Makers

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Rose Yu of the WSJ has a nice recent article on the fragmented nature of the Chinese auto market and how this is leading to over capacity in the industry.electriccarconcept[1] Mark Lehrer identifies some nice classroom uses for this article in the WSJ WeeklyReview service. Here is what he suggests:

  • SUMMARY: The US auto industry has long had three big domestic car makers. China has more than 170. Optimistic Chinese auto executives send shudders through the rest of the global auto sector. Industry watchers worry that the world’s No. 1 auto market could soon be awash in overcapacity. That would rev up competition in China and pressure companies here to export more of their cars.
  • CLASSROOM APPLICATION: As a case in industry analysis, excess capacity seems to be an endemic feature of the car industry (related article). As a study in foresight, the question for class discussion is, first, how to deal with the problem in the US, and second, how to brace for the problem furling over from China in a few years.

QUESTIONS: Continue reading →

Bullets Recalled for Being too Safe

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The Onion offers a news analysis of a recall of defective bullets that fail to kill effectively. Of course, the discussion is a bit silly but this can be used to highlight how blame is assigned in organizations as well as how managers operate under conditions of causal ambiguity…

Contributed by Russ Coff

Free Org Change Videos

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Education Portal has put together a series of videos on Organizational Change that seem like a nice addition especially for online or part time courses. Education Portal Academy offers these videos for free. The content is fairly basic but some of it might be very useful to augment other course materials. This could help you cover these topics outside of class if you want to do an experiential exercise in class (see, for example, the org change ruse on this site) or if you want to give students some additional background resources.

Contributed by Russ Coff

 

 

Team Capability Inventory

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You can take internal analysis down to the team level with a quick introductory exercise. The object is to find some commoFantastic4n capabilities across the team (beyond the obvious) and to find some unique capabilities that each person brings to the table. Then the team must describe how some of the unique capabilities could be leveraged in a team project.

  1. Objective: Find Capabilities. Uncover 3 abilities all members of this small group have in common (other than the obvious things such as you have taken the same classes). For example, all may have strong spreadsheet skills or all are good at interviewing. Then identify 1 capability that is unique to each person in the group. For example, only one is an accomplished musician or has contacts in the insurance industry. Continue reading →

M&A: Resistance is Futile

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The Star Trek reference to the Borg may be lost on most of today’s students. However, their method of absorbing all life forms with which they come in contact is similar to how some firms integrate targets. I recently taught the GSK/Sirtris case in which there is a debate on how much to integrate a target that has a culture of innovation. Ultimately, Sirtris was fully integrated and the original research capabilities were lost. The final decision to shutter Sirtris came just as one of the original co-founders published promising new findings.

Contributed by Russ Coff

Death by PowerPoint

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Academics are notoriously bad at presentations – especially at conferences. Comedian and former engineer, Don McMillan offers some funny but ultimately very practical advice for all of us…

Contributed by Russ Coff

Proof of a Bad Strategy…

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Kathy Eisenhardt has a classic paper describing how “slow” decision makers tend to explore one alternative until it has completely failed rather than considering other alternatives. When facing uncertainty (noisy signals), managers often need strong evidence before altering their opinions. This video depicts the consequences of waiting for such strong evidence.

Contributed by Russ Coff

Do We Need Managers? Valve doesn’t…

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Valve Corporation is a game developer that has 400 employees, no bosses, and is very successful. How can you have a structure that flat? The company, a spawn from Microsoft, seems to be doing just fine thank you. The information at the following seven web links (including a podcast and the employee handbook) contain all of the raw material required for a live case:

I think you could probably just give these seven web links to students, say “discuss,” and get out of the way.

Contributed by Rich Makadok

Valentine’s Day: A Formula for Love

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You may have heard Jay Barney say there cannot be a rule for riches (or the rents will be competed away). However, Harlequin romances has been using a formulaic approach to developing romance novels for years. This HBS case on Harlequin explores their resources and capabilities in this area in the context of a strategic decision. Is the formula a source of advantage? If not, what is? To go with this case, you might consider using:

  • This Pandora radio post on the formula for a love song.
  • This video of Kurt Vonnegut describing the formulaic approach to telling stories (such as Cinderella).

Contributed by Aya Chacar

Groupon: The Next MySpace?

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You could easily fill an hour by just playing the videos below, saying “discuss,” and then stepping out of the way. I use the videos (all 3) along with the available case study — Ivey case W12674, which already has its own teaching note. As preparation for the Groupon discussion, you could also ask students to explore the web site where Groupon makes its sales pitch to merchants, at https://www.grouponworks.com/. Here are the videos:

Groupon would fit best as a closing exercise at the end of a module on sustainability of competitive advantage. To add a humorous interlude to your discussion, you might include this Brazilian video or this ONN TED talk on Social Media.

Contributed by Rich Makadok

ONN: Outsource Your Own Job

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ONN (Onion News Network) spoof on outsourcing — in the end all work is outsourced to one person. Very funny and explores the limits of outsourcing.

Sometimes the truth is stranger than fiction. Here is a real news story about a programmer who outsourced his own job to a developer in China. He continued to get great performance reviews while he watched cat videos on YouTube.

Contributed by Aya Chacar

Perception Drives Strategy

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Another in a series of (entertaining) videos that illustrate perceptual biases. In the context of strategy, decision-makers inevitably have incomplete data from which to draw conclusions. In this context, behavior and choices are ultimately driven by perceptions as opposed to some objective observation of facts. You may also be familiar with the classic video where the task is to count basketball passes and viewers get to involved with the task that they miss the gorilla that walks through the middle. Here is a related article that shows how radiologists also miss the gorilla when it is in the middle of a lung scan.

Contributed by Russ Coff

Quiznos Business Model: Exploit?

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This video describes the business model (musically) by which franchise owners were encouraged to open stores that they knew would be unprofitable. The business model was more about selling franchises than selling sub sandwiches. Very profitable for Quiznos but not so much for their partners. Here is a CBS news story on the resulting class action lawsuit.

Contributed by Aya Chacar

Ryanair: New heights from low costs

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In this interview (9:44), Deputy CEO, Michael Cawley, explains Ryanair’s relentless pursuit of cost reduction and the resulting value created. High demand elasticity contributes to their advantage since the increase in total demand arising from lower prices gives them added volume on routes that might not be profitable for other carriers. The interview is conducted by Juan Jose Guemes from IE Business School. Of course, there are several nice cases written about the company that go well with this.

Contributed by Birgul Arslan

One Man Band Gets a Poor Score…

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This Pixar short features a battle of two one man bands. They each do things fairly well but profit is limited. Then a talented violinist “makes a new market” and they are left out. The one man bands are a bit like diversified companies – competent but not excelling at any task. A rival with superior but focused capabilities might win over “jack of all trades/master of none” competitor.

Contributed by Elisa Alt

Jay’s Coinflip: Innovation as luck

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coinflipJay Barney describes a coin flip exercise to make the point that innovation might be modeled as an outcome of pure luck.  If so, how can firms manage such processes? The exercise is simple:

  • Distribute coins to the class and have them flip.
  • Those who flip “heads” remain standing, “tails” sit down (unless everyone gets a tail – then they remain standing)
  • Repeat until one person is standing & pass all coins to him/her

Discussion focuses on several key points (Russ Coff’s slides emphasize real options):

  • What capabilities/skills did the winner have? Make a big show of trying to find out how the winner did it (it’s all in the wrist, etc.). Often the winner will have flipped 5 in a row or more (a 3% probability?). People will laugh since they know it’s luck.
  • Is it possible that innovative companies are just lucky? We don’t see a lot of repeat innovators and, if it is luck, even these might be explained.
  • Selection bias is a problem if we try and draw conclusions by only looking at winners. In a population (like the class), the probability that someone will flip 5 in a row is rather high. We can only identify causality if we study the whole population.
  • If it is luck, how should one manage investment? This is a nice lead in for portfolios of strategic investments/real options or superior expectations/forecasting.

Contributed by Jay Barney

Don’t Judge Too Quickly…

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Another in a series of videos that illustrate perceptual biases. In the context of strategy, decision-makers inevitably have incomplete data from which to draw conclusions. Any one of the commercials in the sequence below will illustrate the perils of assumptions one might make.

Contributed by Russ Coff

A Cost Advantage From High Wages?

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Many students assume that low wages are a necessary component of a low cost strategy. However, the many of our best examples of cost advantages pay their employers higher wages. In groceries, Aldi comes to mind – they chased Wal-Mart out of Germany because Wal-Mart couldn’t match their prices. Wayne Cascio writes about Costco’s advantage over Sam’s Club. Samsung is another very nice case of this as their low cost advantage is linked to higher productivity obtained from high wage workers. This insulates them for a time from the threat of Chinese competition which relies initially on low wage workers. The only way for them to catch up was to invest in human capital (see the Samsung Electronics case).

Contributed by Aya Chacar

Groupon Follies: Get a Brazilian…

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This Groupon Superbowl commercial is quite funny (even if it is in bad taste). However, the company has struggled and one year after its IPO the price was 81% below the initial price. A recent spike when a hedge fund took a toehold position only underscores the company’s troubles as investors hope for better management. Before the IPO, Groupon turned down a $6B offer from Google — something that Google should appreciate since the company is worth less than half that amount a year after the IPO. One reason for the bearish response is that the entry barriers are fairly low and the competition is significant (e.g., Living Social and even a new eBay venture along these lines). Why was this so hot anyway?

Contributed by Russ Coff